Prices in Ukraine will grow higher than earlier expected / Photo from UNIAN
Inflation in the first quarter of 2021 will temporarily deviate from the target range against a low comparison base.
The National Bank of Ukraine raised its forecast for consumer price growth in Ukraine in 2020 to 6% from the previously projected 4.8%, while inflation is expected to remain within the target range of 5% +/- 1 pp.
"In 2020, inflation will remain within the target range of 5% +/- 1 pp. This will not be impeded by monetary and fiscal support to the economy. Inflation will accelerate moderately in the coming months, to reach 6% at the end of 2020, thus remaining within the target range," the regulator said on its website on April 23.
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Fiscal and monetary policy measures that are aimed to support businesses and households will partially offset the decline in consumer demand. However, consumer demand will remain subdued for long after the quarantine ends, keeping inflation from growing above the target level this year.
Inflation will also be contained by declining global energy prices, which will continue to influence domestic fuel prices. At the same time, the increase in inflation compared with the current level will be primarily driven by a pass through from the recent depreciation of the hryvnia.
In Q1 2021, inflation will temporarily deviate from the target range against a low comparison base. Afterwards, it will decrease and stabilize at the medium-term target of 5%. This level will be achieved thanks to the NBU's prudent monetary policy and a more restrained fiscal policy after the pandemic ends and economic activity recovers.
UNIAN memo. In 2019, inflation in Ukraine slowed the minimum level registered in the past six years - 4.1% in annual terms, dropping below the NBU's medium-term target set at 5%.